Accounting Fraud And Waste Is Standard Procedure at the Pentagon

The Pentagon routinely commits accounting fraud in order to balance its books with the U.S. Treasury's, according to a new report from Reuters. The practice, which apparently has been standard procedure for decades, effectively conceals billions of dollars in waste and fraud from prying American eyes.

Reporters Scot J. Paltrow writes that the fraudulent bookkeeping is a symptom of a larger plague of the U.S. military's operations, a "chronic failure to keep track of its money - how much it has, how much it pays out and how much is wasted or stolen." The report comes as debate continues over whether the Department of Defense's budget can possibly be cut further, after already taking hits through sequestration. Earlier this month, Marine Commandant James Amos told the Senate Armed Services Committee that any further cuts to the Defense budget will cause the armed forces to "end up with more casualties."

The Defense Department's budget for 2013, after the sequester, is $565.8 billion dollars. Reuters reported that it is "impossible" to know how much of that is spent as appropriated. The problem of Pentagon waste has not gone unnoticed — it's almost legendary among Big Government foes — but it's extremely difficult to account for. That's because the Pentagon has never been audited, despite a law that has required an annual audit from every federal department since 1996. Since that date, taxpayers have given the department $8.5 trillion dollars.

Despite a handful of new laws designed to force the Pentagon to submit to at least a partial audit in the next few years, Reuters's investigation indicates that they'll miss those deadlines. Why? In recent years, the department wasted billions of dollars installing faulty software intended to make them audit-ready.

In the meantime, a disparate patchwork of offices in the Defense Department attempt to do the best they can to "balance" the budget against what the U.S. Treasury says they should have spent. This is a monthly process, and it often involves a healthy imagination. Here's an example from the Navy's bookkeeping at the Defense Finance and Accounting Service:

Every month, they encountered the same problem. Numbers were missing. Numbers were clearly wrong. Numbers came with no explanation of how the money had been spent or which congressional appropriation it came from ... The data flooded in just two days before deadline. As the clock ticked down ... staff were able to resolve a lot of the false entries through hurried calls and emails to Navy personnel, but many mystery numbers remained. For those, Woodford and her colleagues were told by superiors to take “unsubstantiated change actions” - in other words, enter false numbers, commonly called “plugs,” to make the Navy’s totals match the Treasury’s.

While some of those plugs were corrected after the fact, many remain on the books. Given the amount of taxpayer money going into the department, there are relatively few details that are known about the department's wasted spending and fraudulent books. For example, between 2003 and 2011, the Army lost $5.8 billion dollars in equipment and supplies sent between reserve and regular units. Reuters also found several instances of various military departments signing contracts for new orders of supplies that the Pentagon already had stored in "excess," meaning that the military had at least a 3-year supply already on hand.